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Legal Articles
By Sarah Philips
When is a will Enough?
When the estate is very small (less than $100,000) and there is no real estate, a will may be adequate. With a small estate involving a bank account and investment accounts, you can obtain designated beneficiary forms from the institution holding your money. The designated beneficiary form will direct the institution to distribute your money to your beneficiaries upon your death. Money in designated beneficiary accounts is not part of your probate estate and it does not have to be probated. With a little planning, an estate with no real estate can completely avoid probate by the use of the designated beneficiary process. Discuss these options with your parents as well, and encourage them to see their lawyer, if they haven't already.
What are the disadvantages of a will?
Even with a small estate with no real estate and even if you carefully implement the designated beneficiary process and thereby avoid probate, there are several disadvantages to a will.
1. A will does not authorize anyone to step into your shoes and manage your affairs if you become incapacitated. Thus, if you become incapacitated, a conservatorship may be necessary.
A conservatorship is a probate court petition asking the court to select, authorize, and then oversee a conservator who handles your affairs. A conservatorship is time-consuming, inconvenient, and expensive. Since a will does not provide for the management of your affairs by a designated person if you become incapacitated, it does not help you avoid a conservatorship.
2. A will does not provide the means by which to shelter your estate from taxation upon your death. When you die, the IRS assesses your estate and imposes a tax on the portion that exceeds the estate tax threshold.
With a married couple, a trust can be used to divide the marital estate into two or three parts upon the death of the first spouse – this keeps some or all of the estate under the estate tax threshold and avoids or reduces taxation of the estate.
What is probate and why avoid it?
Probate is the court-supervised distribution of your property upon your death. When you or your parents die, if you die intestate (without any directions for the distribution of your property) or have a will and your estate is valued at more than $100,000, your estate will be probated. The court records are public; the handling of your estate will not be confidential. The court process is time-consuming and expensive. California law sets the base rate lawyers can charge for probate fees. The rates are based on the value of the estate. The higher the value of the estate, the more the lawyer can charge. Avoidance of probate is the number one reason one should consider having a trust.
If you anticipate conflict between your heirs, probate might be a preferable. Also if you anticipate large creditor claims after your death, you may want to have your estate probated because the probate process will cut off creditor claims.
Sarah J. Phillips is a licensed attorney in the State of California with a private practice in Sonoma, Napa, and Marin Counties. She has been a member of the California Bar since 1985. She is an expert in general practice serving individuals and small businesses with an emphasis in elder law, estate planning and administration, elder abuse litigation, and personal injury litigation. She has BA cum laude in Spanish from Beloit College in Wisconsin and a JD from Franklin Pierce Law Center in New Hampshire. She has taught high school Spanish, raised three sons, and served as a board director for various schools and nonprofits.
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